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This study was conducted in order to find out the impacts and causes of loan default to
MFIs activities using PRIDE Tanzania ltd- Pamba branch in Mwanza as a case study.
This study specifically focused on finding out the impacts of loan default on MFIs
operational costs, income, profit and lending, examining extent in which loan
supervision, monitoring and control affects loan repayment, identifying whether
multiple borrowing by clients leads to loan default, finding out whether the use of funds
by clients for unintended purpose contribute to loan default.
Research design used was case study design. The study carried out in Mwanza region in
Nyamagana and Ilemela district sample size comprised of 100 clients who benefit from
PRIDE Tanzania ltd services and 10 loan officers of PRIDE Tanzania ltd .Sampling
techniques adopted was Simple random sampling technique used for loan officers and
Purposive sampling technique used in sampling MFIs clients .Data was processed
through Statistical Package for Social Scientist and analyzed and presented in the form
of frequencies, percentages and tables.
The study findings revealed that interest rates charged on loans, diverting funds from its
intended use, multiple borrowing has a direct impact on repayment. The research also
revealed some of the causes that contributed to the default by some customers such as
lack of collateral and high interest rates. The study also concluded that formation of
strong solidarity groups is key to preventing high arrears. MFIs should also provide
appropriate training and supervision to clients regarding the use of their loans .Further
more MFIs should have clear and effective credit or lending policies and procedures and
must be regularly reviewed. |
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